I’ve touched on this hypothesis before. Now I’m going to update it slightly with some information from the quest “Seeking the Soulstones” and Warcraft Chronicles Vol. 1
We know that the Titans use “Titan Orbs” to collect and store information. These orbs are mechanical, and found in many places that Mechagnomes are found. They are entities, more like creatures than objects. They move and perform functions autonomously.
Perhaps in the distant past the Titans would send a few dozen of these orbs out to different star systems to see if there were any planets there. If any planets were directed, the Orbs take samples of the magic energy found there, and return to the titans.
This functionality would be in line with what we know about how Titans operated. For example, we know that the Titans imbued the ered’ruin with an attraction to fel magics so that they could seek it out and destroy it.
Doomguard says: …before Sargeras freed us, we were the Titan’s hounds. Forever enslaved to police the use of arcane magics.
Doomguard says: Sacrificial magic was considered the greatest violation of life and we were attuned to instantly punish those who delved into such… delicious sorcery.
In the case of these orbs they would be designed to seek out all forms of magic, and record where they were found.
So then, what happens to these orbs when they land on a planet that is infested with the Old Gods? I don’t think it’s too much of a stretch to see them being afflicted with the curse of the flesh.
There are physical similarities. Round bodies is obvious, but what if the ‘cage’ part of the orb was degraded and became the tentacles that hang down below the Observers? On the central part with the filigree, there are large white glowing spots; what if these became the multiple eyes of the observers?
I think they have enough in common in both form and function to have a strong case for them to be the same thing. Less extreme metamorphosis has been seen the the World of Warcraft before.